Does The Mosaic Company’s (NYSE:MOS) CEO Pay Matter?

Simply Wall St
August 25, 2018

Leading The Mosaic Company (NYSE:MOS) as the CEO, Joc O’Rourke took the company to a valuation of US$11.36b.
Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing.
This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor.
I will break down
O’Rourke’s pay and compare this to the company’s performance over the same period, as well as measure it against other
US
CEOs leading companies of similar size and profitability.

What has MOS’s performance been like?

MOS can create value to shareholders by increasing its profitability, which in turn is reflected into the share price and the investor’s ability to sell their shares at higher capital gains.
Over the last year
MOS
delivered
negative earnings of -US$93.4m
, compared to the previous year’s positive earnings.
Moreover,
MOS hasn’t always been loss-making, with an average EPS of US$2.44 over the past five years.
During times of
unprofitability
the company may be
going through
a period of reinvestment and growth, or it can be
an indication
of some headwind.
In any event,
CEO compensation should
mirror
the current
state
of the business.
In the most recent
financial report,
O’Rourke’s total
remuneration
grew
by 14.1% to US$8.4m.
Moreover,
O’Rourke’s pay is also made up of 59.87% non-cash elements, which means that
fluctuations
in MOS’s share price can
impact
the
real
level of what the CEO actually
receives.
NYSE:MOS Income Statement Export August 24th 18

Is MOS overpaying the CEO?

Even though
no standard benchmark exists,
since
compensation
should account for specific factors of the
company and market,
we can
fashion
a high-level
thresold
to see if MOS
deviates substantially from its peers.
This outcome
helps investors ask
the right question about O’Rourke’s incentive alignment.
Typically,
a US large-cap
has a value of
$64.9B,
creates
earnings of $3.6B and
remunerates
its CEO
circa
$12.2M
annually.
Typically
I would use earnings and market cap to account for variations in performance,
however, MOS’s negative earnings
reduces
the effectiveness of this method.
Analyzing the range of remuneration for
large-cap executives, it seems like
O’Rourke is
paid aptly compared to those in similar-sized companies.
Overall,
even though
MOS is
loss-making,
it seems like the CEO’s pay is
reflective of the appropriate level.

Next Steps:

In the upcoming year’s AGM, shareholders should think about whether another increase in CEO pay is justified, should the board propose an executive pay raise. Will this raise take O’Rourke’s pay beyond the bound of reasonableness, or will it help in retaining the talented executive? Being proactive in governance decisions is a key part to investing, and collectively, investors can make a big difference.
If you have not done so already, I
urge
you to complete your research by taking a look at the following:

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St is a financial technology startup focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of equity analysts with a public, market-beating track record. Learn more about the team behind Simply Wall St.

MOS’s investment overview

MOS’s Competitors

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